As an Australian expat, life comes with all sorts of adventures, challenges, and—let’s be honest, a few headaches too, particularly, when a tasks like catching up on your overdue tax returns slip through the cracks sometimes.
If you’ve been living overseas and have inadvertently missed lodging a few years of your Australian tax returns, you’re definitely not alone. In fact, it’s very common for Australian expats to fall behind with their Australian tax returns. many tell our Expat Taxes team that as non-residents who are only required to pay tax on Australian-sourced income, that since their Australian income was below the tax-free threshold (currently $18,200 at the time of this article), they didn’t think that they needed to lodge an Australian tax return! But as our team explains, that’s simply not true!
Rather than explaining in detail why most Australian expats need to continue lodging returns, we’ll keep it brief here (to learn more, take a look at an earlier article that we wrote Do I need to lodge a tax return while living overseas?). In short, unless you’ve previously lodged a “FINAL” tax return, notifying the Australian Taxation Office (ATO) that no further returns will be necessary for you, because you continue to hold a Tax File Number (TFN), the ATO will expect you to lodge a tax return every, single year.
So, if you find yourself in this situation (with a bunch of outstanding Australian tax returns), don’t stress! Catching up on overdue tax returns might feel overwhelming, but we’re here to help, and with the right approach and guidance, it’s manageable, and often can be relatively painless!
Whether it’s been years since your last lodged return, or you’ve simply fallen behind a year or two, getting up to date with the Australian Taxation Office should be a priority, especially for expats who are juggling both Australian and foreign tax obligations.
Why It’s Important to Lodge Your Tax Returns
Whether you’re an Australian expat or not, you’re still required to lodge your Australian tax return each and every year, even if you’ve been living overseas for years. Australian tax residency rules can be complex, particularly when you have links to two or more countries, but if you’re considered an Australian tax resident, you’re likely required to report your worldwide income—including any foreign salary, investments, or rental income.
Lodging your overdue tax returns can have several benefits. You may be entitled to a refund or have unused tax credits, and getting everything in order will also give you peace of mind. Plus, staying compliant with your tax obligations helps you avoid unnecessary penalties and interest from the ATO, which can add up if returns remain outstanding for too long.
Step-by-Step Guide to Catching Up on Overdue Tax Returns
1. Find Out How Many Tax Returns Are Overdue
The first step is to figure out how many years of overdue tax returns you’ve missed. This can seem daunting, but don’t worry—we can help. As a registered tax agent, we can access your ATO lodgement history and check how many outstanding tax returns you have.
If you prefer to do it yourself, you can log into your myGov account and link it to the ATO to view your lodgement status. Alternatively, you can contact the ATO directly (from overseas, dial +61 2 6216 1111) but make sure that you have your tax file number handy.
2. Determine If You Need to Lodge Any Returns
Not everyone is required to lodge a tax return every year. If you were a tax resident and your income was below the tax-free threshold or if you were a non-resident for tax purposes who did not earn any Australian income at all during your time overseas, then you may not need to lodge tax returns for the relevant years. If that’s the case (and you weren’t required to lodge a full tax return), then instead, you will be required to file a ‘Return Not Necessary’ form, (also known as a Non-Lodgement Advice) in order to notify the ATO that no tax returns were necessary for those relevant financial years.
If you need some help determining what’s required for each year, we can review your situation, assess your residency status and Australian tax obligations, and advise whether you need to lodge a return or a ‘Return Not Necessary’ form for each year. It’s important to get this right, as failure to lodge a required return can lead to hefty fines, and penalty interest charged by the ATO at exorbitant rates (e.g. 11.36% per annum, as at the time of writing), even where no tax is owed.
3. Gather Your Financial Information & Tax Documents
Getting your paperwork in order might seem like the most overwhelming part, especially if you have a lot of outstanding overdue tax returns and you’ve been living overseas with your financial documents are scattered across multiple countries. But don’t worry—there are ways to make this easier.
For Australian income, the ATO’s pre-filling report can be a lifesaver. This report collects information on income such as PAYG summaries, bank interest, and investment income, which the ATO has already received from third parties like banks and employers. We can access these reports as your tax agent and use them to help complete your returns quickly and accurately.
In most cases, your foreign income may not be required, but if it is, you’ll need to track down relevant details, such as salary statements/pay-slips, foreign tax paid, foreign rental income earned, and details of income earned from any overseas investments along with details and receipts for any foreign deductions that may be claimable. Keeping records of this income is crucial, especially if you’re claiming foreign tax credits.
4. Lodge Your Overdue Returns
Once all your financial information is ready, it’s time to lodge the overdue returns. If you have multiple years of returns to file, it’s best to start with the oldest one and work your way up to the present.
Lodging your overdue tax returns through a registered tax agent (like us!) makes the process much smoother. We’ll handle all the ATO communications, make sure everything is lodged correctly, and provide guidance on how to claim any deductions or offsets you might be entitled to.
Speaking of lodging, we’re often asked whether it’s better to prepare and lodge each return one-by-one or to prepare each of the outstanding returns and lodge them in a batch?
Penalties for Late Lodgement: What to Expect
The ATO does impose penalties for late tax return lodgement, but don’t panic—there’s often room for negotiation, especially if you have a reasonable excuse for falling behind (like being overseas, dealing with health issues, or financial difficulties). Penalties usually start at $222 for every 28 days a return is overdue, up to a maximum of $1,110. However, in some cases, penalties can be reduced or even waived if you act quickly and lodge your overdue returns.
By engaging a tax agent, you may also have a stronger case for reducing penalties, as we can liaise directly with the ATO on your behalf and explain any mitigating circumstances that led to the delay.
What Happens If You’re Owed a Refund?
Believe it or not, lodging your overdue tax returns late doesn’t automatically disqualify you from receiving a tax refund. If you’re owed a refund for one or more of your overdue returns, the ATO will still process these once your returns are lodged, and in many cases, refunds can offset any penalties or interest charged. In fact, getting caught up might even put a little extra cash in your pocket!
What If You’re No Longer an Australian Resident?
For expats who have permanently moved abroad and no longer qualify as Australian tax residents, the process can be different. You may not need to lodge Australian tax returns if you are fully considered a non-resident AND if you did not earn ANY Australian income at all, but it’s important to confirm your residency status with a tax professional. Additionally, if you had any Australian-sourced income while overseas, you may still have obligations to report it to the ATO.
Take Action and Get Up to Date
The good news is, no matter how far behind you’ve fallen behind and have a bunch of overdue tax returns to catch up on, it’s possible to get back on track. Our team at Expat Taxes Australia specialises in helping expats navigate their tax obligations, whether you’re catching up on overdue returns or just need some guidance.
Ready to get started? Book an appointment with our team or reach out to us directly for a personalised consultation. We’re here to help you get your tax affairs sorted, so you can focus on what matters most, whether that’s life abroad or settling back in Australia perhaps.
Don’t bury your head in the sand an wait until things get more complicated. Let’s take the stress out of tax time and get you back on track!
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